Review of Retail Payments Regulation Summary of Submissions to the Review of Merchant Card Payment Costs and Surcharging Consultation Paper

Transparency of merchant fees

There was support for the proposed measures to boost the transparency of merchant fees across many submissions.

Requiring acquirers to publish their cost of acceptance

Many submissions supported the proposal in the Consultation Paper. Feedback on the proposal generally indicated that:

  • The information would be useful to merchants. Submissions from merchants generally supported the proposal. The consensus from merchants’ submissions was that the proposed transparency requirements would help merchants compare fees across providers. While the proposed data format was designed to be simple to target small and medium-sized merchants, even some large merchants submitted that this information would be helpful. Merchants generally agreed that the proposed category breakdowns were helpful. Groups representing merchants, some government agencies and regulators also supported the proposed transparency requirements.
  • The quarterly frequency of publication was appropriate. Users of the data such as merchants and government entities stated that quarterly publications balanced the reporting burden with receiving timely information.
  • The large acquirer threshold ($10 billion in card transactions per year) was appropriate. Submissions generally agreed that this threshold adequately balanced transparency with the reporting burden on smaller institutions.

Some submissions suggested adjustments to the proposal regarding:

  • Merchant size. A larger merchant suggested removing large merchants from the sample because their lower fees are cross-subsidised by higher fees on other financial services, which would distort the data and lead to misleading comparisons. A government agency questioned the comparability of data across merchants, even if they are of the same size.
  • Publication timing. A large merchant stated that the time for publication should be extended to 45 days. A PSP stated that it should be shortened to 15 days. A card scheme stated that quarterly publications were too frequent and that prices tended to be stable over long periods of time.
  • Large acquirer threshold. Some submissions stated that the threshold of $10 billion card transactions per year (equivalent to around 1 per cent market share) was too high or that the requirement should apply to all. A PSP stated that the threshold should be higher and set at 5 per cent market share.
  • Implementation period. A group representing merchants stated that an implementation period of six months was too short.
  • Design. A regulator recommended further consultation to ensure small businesses use the information. A group representing payments industry participants stated that the data publication could be better designed to help merchants switch providers.
  • Data breakdowns by plan type. Some submissions supported transparency but stated that the proposal oversimplifies pricing. According to these submissions, prices should be broken down based on blended versus interchange++ plans, with strategic merchants also reporting separately. A group representing payments industry participants stated that the disclosures should account for variance across merchant profiles, product types and pricing plans.
  • Cost of acceptance definitions could be clarified. Some submissions expressed concerns about how ‘cost of acceptance’ would be defined, including whether ancillary services would be included.
  • Inclusion of three-party schemes. A card scheme stated that any requirement must apply equally across all payment options including three-party networks to maintain an even playing field.

Some submissions opposed the proposal because:

  • The average cost of acceptance data are commercially sensitive information.
  • Merchants would not use the information. Some acquirers and schemes stated that the information would not be useful to merchants, since averages mask differences across merchants such as scale, merchant category and other factors.
  • Merchants would not switch providers. An issuer stated that the proposal would not help merchants compare across providers due to the complexity of the information. A government agency stated that switching providers is rarely viable for merchants as it risks operational disruption.
  • The data across providers are not comparable and could be misleading. A card scheme stated that the proposed publication requirements may be difficult to implement as fee structures vary widely across providers and are often bundled with value-added services. Another card scheme stated the proposal would provide limited value due to multiple factors driving cost of acceptance beyond categories suggested in the Consultation Paper including industry risk profile, transaction characteristics, card-present versus card-not-present, fraud history, integration requests, value-added services, contract terms and volume commitments.
  • The design of the disclosures should be led by industry. A card scheme stated that the RBA should follow the UK Payment Systems Regulator’s approach of an industry-led initiative to develop best practice for cost transparency.
  • It would be a large compliance burden for acquirers to provide the information.
  • The disclosures are overly focused on price, which could dissuade competition based on product differentiation.

Publishing more information on merchant statements

Many submissions supported the proposed amendments to merchant statements to require a breakdown of domestic and international transactions. Reasons for supporting the proposal included:

  • The information would be helpful to merchants. There was support among merchants and organisations representing merchants for more information on merchant statements about their costs of acceptance. Merchants stated that this information would help with decisions about routing of debit transactions and which payments to accept. Government agencies also supported the proposal.
  • Existing lack of standardised reporting across acquirers. Merchants indicated that inconsistent reporting made it difficult to compare pricing across acquirers, particularly when a merchant used multiple acquirers.
  • Increased transparency regarding the high costs of international transactions relative to domestic transactions.

Some suggested adjustments to the proposal included:

  • Further breakdowns of fees. A few submissions stated that merchants should be provided a breakdown of their fees by interchange fees, scheme fees and acquirer margins.
  • Further breakdowns by card-present and card-not-present transactions to highlight the relative high cost of online transactions.
  • Further clarity on definitions. A few submissions commented on the need to clearly define ‘cost of acceptance’ to ensure fees are comparable across acquirers. They stated that the RBA should provide additional guidance to ensure consistent reporting.

Some submissions opposed the proposal because:

  • The compliance costs to produce the information would be high.
  • Merchants would not use the information. Several submissions from payments industry participants stated that merchants would not find the information useful. This was particularly the case if merchants were on blended plans, as the information would be too complex.

Several submissions commented on the application of the transparency requirements to taxis:

  • Several submissions supported removing the exemption on the merchant service fees on taxi fares being reported in merchant statements according to Standard No. 3, on the basis that the RBA’s policies should apply consistently. A bank stated that removing the exemption would reduce the compliance burden for the proposed changes to merchant statements.
  • A PSP stated that the exemption should not be removed, so that state regulations can continue to operate.
  • A government agency noted there could be a public interest case to exempt taxis if the administrative burden outweighs the benefits. The unique nature of the taxi industry, including its reliance on standardised fare structures and high transaction volumes, could make compliance disproportionately costly relative to the competitive benefits.

Other options

Alternative suggestions on merchant fee transparency included:

  • Comparison tools. Two organisations representing merchants stated that the RBA should develop an online comparison tool. One bank stated that a marketplace (similar to a comparison website) should be set up for small businesses to find a better deal could be a more effective measure.
  • Interoperability. A PSP stated that there should be interoperability so that merchants can switch acquirers without replacing point-of-sale infrastructure.
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